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Merger: Cyberonics, Inc. (NASDAQ:CYBX)
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Cyberonics, Inc. (NASDAQ:CYBX) [Trend Analysis] rose today on merger rumors. The merger with Sorin SpA is believed to be for tax inversion purposes. At the same time CYBX announced their Q3 earnings of 59 cents a share versus an expected 57 cents.The deal will make quite a colossal medical device company, that at the same time should be able to increase earnings not only from synergies but as indicated, largely through being able to reduce their tax bill.
Cyberonics, Inc. (NASDAQ:CYBX) last traded at $66.60 after moving up 10.32% for the trading day.
CYBX is trading with a trailing 12 month P/E multiple of 28.46 and an estimated forward P/E multiple of 24.85. The stock has an estimated 5 year annual growth of 17.46% and a PEG multiple of 1.63.
From a value investor perspective, as mentioned Cyberonics, Inc. trades on an estimated forward P/E multiple of 24.85. The current estimated forward P/E ratio for the market as a whole is approximately 19.82. Therefore, for value investors CYBX appears to be overpriced.
For growth investors, who are more interested in growth into the longer term for the stock, we look at the PEG multiple (P/E to growth) of Cyberonics, Inc. (NASDAQ:CYBX). This PEG multiple takes into account the expected long term growth in earnings of Cyberonics, Inc. rather than merely the growth for one full earnings period ahead.
As a rule of thumb, growth investors often believe a stock with a PEG of between 0 and 1 is considered to be underpriced, between 1 and 2 to be at fair value and over 2 to be overpriced. Based on the PEG ratio of CYBX being 1.63, we consider Cyberonics, Inc. to likely be priced at fair value.
The mean analyst 12 month target price for Cyberonics, Inc. (NASDAQ:CYBX) is currently $67.14 or 0.81% above the current price. Additionally, the stock has been as high as $76.48 and as low as $48.19 in the last 52 weeks. Analysts are estimating that CYBX will report earnings per share of $0.64 next quarter.
